A qustion about yield ....

mathie

So I'm looking at a house that rents for 1,500 a month.
Am I correct in thinking it should be 1,500 * 12 * 14 = 252,000.
So the house should be 'worth' 252K.

Would that be an average yield?

Cookie_Monster

average yield would be around 7% I think for a years rent, using this you get 257k. More or less the same.

Bill2673

I'd suspect you should look at a yield of somewhere between 5% and 8%, not sure how you handle tax within that.

You have applied a yield of 7.2%, towards the high end. A 5% yield would price it at €360,000.

Bear in mind that yield on cash is very low, at best around 3% for a long term savings account. So yield for other investments are priced off this and shouldn't be that much more than it. But on the other hand, the property market is in a mess and opportunities may be had. (time will tell whether or not they are good opportunities).

I'm not in the property/ real estate industry. Its just an opinion.

The_Conductor

An addition to this- rents are continuing to fall- and the proposals are for rent allowance (which has set a defacto floor on rents) to continue to fall.

Personally I think you are assuming-

1. Too high a potential rental income
2. Yield that is probably unattainable
3. You are not factoring other costs into the equation (such as 15% vacancy, upkeep on the property, tax, abolition of mortgage interest as a deduction for investors etc etc).

The abolition of mortgage interest (in stages, to be complete by 2015)- alone, is top of my list for not buying rental property in the current market.

S.

OMD

mathie wrote: »

So I'm looking at a house that rents for 1,500 a month.
Am I correct in thinking it should be 1,500 * 12 * 14 = 252,000.
So the house should be 'worth' 252K.

Would that be an average yield?

That would not be an average yield but a good yield and above historic norms in this country over the long term. Indeed over the long term very few countries average a 7% yield on property. A snapshot of some yields here http://www.globalpropertyguide.com/investment-rating shows the vast majority have yields below 7%.

D3PO

OMD wrote: »

That would not be an average yield but a good yield and above historic norms in this country over the long term. Indeed over the long term very few countries average a 7% yield on property. A snapshot of some yields here http://www.globalpropertyguide.com/investment-rating shows the vast majority have yields below 7%.

so its off to Lima to buy